CMS Final Home Health Medicare Rule Cuts Payments by 1.3%, Revises Methodology

The Centers for Medicare and Medicaid Services (CMS) released the final Medicare payment rule for home health providers, mitigating the proposed severe cuts presented earlier this summer. The final rule implemented a 1.3% reduction in aggregate Medicare payments to home health agencies, which, while less drastic than initially proposed, still presents challenges. A notable aspect of the final rule is CMS's revision of its payment methodology after receiving extensive industry feedback, signaling a more responsive approach to future rate-setting. Despite the smaller cut, the payment reduction comes at a time of rising labor costs, workforce shortages, and increasing patient complexity, exerting pressure on home health agencies' financial viability. Industry leaders warn that the reductions could lead to reduced access to care, particularly affecting small agencies and those in rural or underserved areas. CMS's methodology revision acknowledged other influencing factors beyond the Patient-Driven Groupings Model (PDGM) implementation, including the OASIS-E assessment, home health value-based purchasing, and Medicare Advantage expansion. This recalibration is expected to foster payment increases beginning in 2026, though these do not alleviate immediate operational challenges faced by providers. The rule's financial impact may hinder home health providers' ability to invest in technology, which is critical for operational efficiency and sustainability amidst narrow margins. Several providers and advocacy groups have called on CMS to exclude fraudulent data affecting payment calculations and urged the agency to reopen rulemaking to correct distorted payment methodologies. While such reopening of rulemaking is possible, historical precedent suggests it is unlikely absent significant regulatory or political shifts. Nonetheless, the current adjustments demonstrate how industry advocacy influences CMS policymaking. Providers and organizations like LeadingAge, the National Alliance for Care at Home, and VNS Health remain engaged with CMS and legislators to strengthen the home health benefit. The final rule marks progress compared to the original proposal and illustrates CMS's partial responsiveness to stakeholder input, although challenges for the industry persist. Moving forward, the home health sector anticipates a trajectory of future payment increases beginning in 2026. However, the immediate concern remains the sustainability of small and rural providers under constrained payment rates and ongoing temporary payment recoupments. Stakeholders emphasize the critical need for congressional intervention to stabilize funding, enable technological investments, and maintain access to home health care services nationwide. This development in home health Medicare payment policy underscores the complexity of balancing regulatory budget neutrality, provider financial health, and patient access amid evolving care delivery models and demographic pressures. The CMS final rule reflects incremental policy shifts shaped by advocacy but leaves significant challenges for providers to navigate in the short term.